Gigamon grows locally for network monitoring success

In the age of outsourcing, it’s rare for a technology hardware company to do much manufacturing in the United States. It’s too expensive, conventional wisdom goes. Yet that’s just what Milpitas’ Gigamon LLC has done. The company does all the design engineering, manufacturing and shipping of its networking equipment locally, and CEO Ted Ho said he wouldn’t have it any other way.

“The overhead of managing a separate team overseas, the costs of outsourcing, are not easily quantifiable,” he said. “The technology we are in, the mindset we have, doesn’t allow it. Most of the talent is in Silicon Valley, and we deal at very high speed and high reliability. It’s not, ‘Hey, it’s working 99.9 percent of the time, that’s okay.’ No. We need it to work 100 percent of the time. That challenge means we need to stay local.”

If local engineering is expensive, Gigamon’s success doesn’t seem to show it. The company said it became profitable in 2006, and that its revenue has grown steadily by about 50 percent yearly since then, although Ho declined to give a specific revenue number. In 2010, the company raised a $22.8 million venture round. Last year, it used that infusion of capital to double the company’s head count.

Ho sees rapid growth continuing. It employs 139 today and another 50 people or so are expected to be added in the coming year.

Fueling that growth has been an increased market demand for products that Gigamon offers in an era when cloud computing has made most IT networks more complex than ever before.

Gigamon makes equipment that helps customers better monitor their networks’ security and performance. It is especially useful in data centers where their customers are using network virtualization.

For example, in virtualized networks, the routes that data traffic take change constantly, and Gigamon’s equipment allows its customers to keep track of that.

This increased monitoring lets Gigamon customers optimize their networks to be faster, more secure and have less downtime.

In a sense, the company’s products enable customers to get the most use out of the monitoring equipment they already own, said Paul Hooper, Gigamon’s VP of marketing.

“We say, let us connect all that equipment that you’ve already spent hundreds of thousands of dollars on, and we’ll bring it all together for you, and the return on investment will be immediate,” he said. “It’s a pretty easy sell, usually.”

The company also works with channel partners and resellers, such as Santa Clara’s Computer Media Technologies Inc., which consults and sells equipment for data centers. CMT has been offering Gigamon’s products for about a year, said VP of Business Development & Alliances Victor Villegas, and it found immediate demand with large enterprise customers like Expedia Inc. and Swedish Medical Center in Seattle.

“They very much fit a real need, they’re at a great price point, and they have great technology behind it, so they’ve been embraced by our customers very quickly,” Villegas said. “The explosion of data is really creating the need for a company like Gigamon.”

Andre Kindness, an analyst with Forrester Research Inc., said that the market for such products is still relatively small, probably no more than about $200 million. But he expects it to grow very quickly. The amount of data being sent through IT networks is exploding, and even smaller companies are becoming dependent on things served from the cloud. In that environment, optimization such as what Gigamon offers is quickly becoming very attractive, he said. While nowadays products like Gigamon’s are only used by the largest enterprises, Kindness said he expects them to become a standard for even small and medium-size businesses within five years.